'Two-Way Battle' for Prudential Life Sale, Fubon as a Variable

Advantages of Non-Price Factors: KB Financial
Funding Power Leads MBK Competitive Landscape
Fubon Alert to Late Due Diligence Participation

[Asia Economy Reporter Kangwook Cho] With the recent entry of the Taiwanese financial group Fubon into the Prudential Life Insurance acquisition battle, which had previously been a two-way contest between KB Financial Group and MBK Partners, there is speculation that a new competitive landscape may be forming. The financial sector views Fubon's late decision to participate after initially withdrawing from due diligence as a significant potential variable.

According to industry sources on the 17th, Fubon Group has recently formed an advisory team including global investment bank UBS and accounting firm Samil PwC and has begun due diligence on Prudential Life Insurance. Initially, Fubon Group participated in the preliminary bidding but reportedly gave up on due diligence. This was interpreted as a judgment that their chances were slim amid the prominent two-way battle between KB Financial and MBK Partners. However, their late participation in due diligence has sparked speculation that they could become a dark horse. Goldman Sachs, the sales agent, stated that since Fubon was a candidate who participated in the preliminary bidding, there is no issue with them conducting due diligence. As a result, five parties will participate in the main bidding for Prudential Life Insurance scheduled for the 19th of next month: strategic investors (SI) KB Financial and Fubon Group, and financial investors (FI) MBK Partners, IMM Private Equity, and Hahn & Company.

Fubon Group entered the Korean market in 2015 by acquiring a 48% stake in Fubon Hyundai Life Insurance (formerly Hyundai Life Insurance). Subsequently, in 2018, through a capital increase of 300 billion KRW, Fubon Life, a subsidiary of Fubon Group, became the largest shareholder with 62%. At that time, Hyundai Mobis, the second-largest shareholder, did not participate in the capital increase, and Fubon Life acquired all the forfeited shares. Since then, Fubon Hyundai Life has strengthened its retirement pension business by leveraging its relationship with the previous largest shareholder, Hyundai Motor Group. If Fubon succeeds in acquiring Prudential Life Insurance, it could rapidly position itself as a leading player in the domestic market from a mid-sized insurer.

In the preliminary bidding that closed last month, MBK Partners reportedly submitted the highest bid. This was why MBK Partners was seen as the leading candidate in the public bidding for Prudential Life Insurance. The issue lies in MBK Partners' two-year "non-compete" agreement signed when selling Orange Life (formerly ING Life) to Shinhan Financial Group in September 2018. This means they can enter the insurance business from September this year, implying that the deal closing must occur after September. Considering that it typically takes about two months from the main bidding to contract signing, the process would be delayed by an additional three to four months. Analysts suggest that MBK Partners' aggressive acquisition stance compared to other candidates is due to this timing constraint.

KB Financial's acquisition intent, with a focus on management, is also notable. They have formed a task force team (TFT) with JP Morgan and Deloitte Anjin as advisors. This TFT will be responsible for the post-merger integration (PMI) process with KB Life if the acquisition succeeds. The issue is the price. With MBK Partners showing aggressive intent and Fubon Group deciding to participate late, price competition is expected to intensify further.

KB Financial Chairman Yoon Jong-kyu has repeatedly expressed that life insurance mergers and acquisitions (M&A) are a top priority but has shown caution against "overpaying." KB Financial also stated in a recent conference call that it will approach the Prudential Life Insurance acquisition carefully. Previously, they withdrew from the acquisition of the former ING Life due to controversy over the high price.

A financial sector official said, "So far, the two-way battle between KB Financial, which has advantages in non-price factors such as major shareholder suitability screening, and MBK Partners, which has strong financial power, is the most likely scenario," adding, "Fubon Group's late participation in due diligence can be interpreted as showing acquisition intent, and there is also a possibility that they could form a coalition through a consortium or other alliances."

This content was produced with the assistance of AI translation services.